London Prime Grade A Office Rents Poised To Hit Record Highs

UNITED KINGDOM – Despite the shift to hybrid work arrangements, Savills expects rents of prime Grade A office space in the City of London to reach record highs this year, reported The Standard on Thursday evening (15 September, SGT).

According to data from the property consultancy, rents of prime Grade A offices in the city have increased from £77 psf in Q2 2021 to £83 psf in the 2nd quarter of this year due to solid demand.

So far this year, the City of London has recorded 65 office leases with rent of more £70 psf compared to merely 16 for the entirety of 2021 and 30 in 2020.

“There is a widening gap between Prime offices and good quality Grade A office space as people-led, amenity rich design becomes ever more prevalent in occupier’s property decisions,” said Catherine Owen, Director in Savills’ Central London office leasing team.

“The flight to quality amongst office occupiers in the last 24 months is well documented but what the levelling out of Average Grade A office rents tells us is that it is no longer enough to offer good quality space.”

She revealed that office tenants want lots of amenities, with the most sought-after office space on the market offering everything from gyms and spa facilities to libraries and dog grooming services. Most importantly terraces and access to open space are highly coveted by occupants.

“Despite wider economic uncertainty, Prime offices in London are performing well as businesses compete for office design and amenities that will entice employees to use these spaces.”

“Landlords need to harness this demand by ensuring amenities within a building are accessible for all building users, and not limited by floors. Through this approach it will be possible to broaden out values across a building,” Owen explained.

Will Wilson, City office analyst at Savills, added that there continues to be an intensification of office tenant demand for the best in class space across the City of London, which is consequently insulating prime headline rents.

Office tenants that have agreed to occupy new office space in the city this year include Linklaters at 20 Ropemakers, Hogan Lovells at Atlantic House, Kirkland & Ellis at 40 Leadenhall, Palo Alto Networks at 22 Bishopsgate, and Holman Fenwick Willian at 8 Bishopsgate.